Goldman may withhold executive pay; Deutsche-Trump dealings eyed

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Withholding judgement
Goldman Sachs said it won't pay millions of dollars in deferred bonuses to former CEO Lloyd Blankfein and two other former top executives until it completes its investigation into the bank's role in the scandal-plagued1MDB fund. It also said it might claw back some of the $23 million it paid current CEO David Solomon last year. "By hitting executive pay — Wall Street's most obvious tool to reward and punish — the moves are the clearest sign yet that Goldman sees potentially serious consequences in the 1MDB investigation," the Wall Street Journal says. "The bank faces a large fine and a reputational black eye it can ill afford as it courts retail customers and invests heavily in new businesses." Wall Street Journal, Financial Times, New York Times

Bail on the chief
Deutsche Bank, Donald Trump's longtime banker, refused a request in 2016 from the future president’s business to increase a loan for one of its Florida golf resorts “because of concerns about expanding the bank’s relationship with then-candidate or his company.” The German bank “also raised questions internally about whether it had enough information about the ultimate use of the funding.” A spokeswoman for the Trump Organization dismissed the story as “absolutely false.”

“Trump’s loan request set off a fight that reached the top of the German bank,” the New York Times says. “Senior officials at the bank, including its future chief executive, believed that Mr. Trump’s divisive candidacy made such a loan too risky. Among their concerns was that if Mr. Trump won the election and then defaulted, Deutsche Bank would have to choose between not collecting on the debt or seizing the assets of the president of the United States.” Financial Times, New York Times

Later that same year, Deutsche Bank, "seeking to slash its exposure to Russia," sold half of a $600 million loan it had outstanding to VTB Group, a large Russian state-owned bank, to another Russian bank, Alfa Bank. VTB repaid Deutsche in August 2017. “Deutsche Bank’s effort to shed the VTB loan came as the German bank worried about its financial contacts with Russia, which U.S. intelligence officials accused of interfering in the 2016 presidential election while the campaign was still under way.”

Deutsche Bank has received an “inquiry” from two House committees, according to the Washington Post. “This appears to be among the first steps in House Democrats' plans to launch multiple investigations into Trump, his businesses and their connections to Russia.”

Some House investigators are “interested in probing whether the VTB loan and Trump-loan rebuff may be relevant to their ongoing inquiries into Mr. Trump’s finances,” the WSJ says.

Wall Street Journal

Increased surveillance
A 103-page report released last week by Wells Fargo "revealed nuanced changes to the company’s system of internal checks,” including heightened risk management procedures, to “address gaps in the previous system.” For example, “the company consolidated its retail-banking auditing team under a centralized group in an effort to break down silos and have a broader view of risk across the business. The changes illustrate how the portfolio of risks facing banks is expanding, and how auditors are being organized to manage them.”

Not close enough
While only about one in 10 senior management jobs in the investment industry is held by a woman, one out of every four bosses is female in the “burgeoning field” of collateralized loan obligations, “one of the most popular products on Wall Street. The greater diversity among CLO managers stands as a potential model for the financial industry as it struggles to address sexual discrimination and harassment in the #MeToo era. Women CLO bosses are still a minority, but they far exceed the female presence in the upper echelons of almost every other financial-services fiefdom.”

Financial Times

Ready to rumble
JPMorgan Chase believes its newly combined corporate treasury and retail merchant services divisions will give it “an edge in a payments world where Apple Pay, PayPal and Stripe have stolen a march in the past decade.” The bank “hopes to increase its share of the global treasury services market by almost 50% in the ‘next few years’ by doing more business with foreign multinationals and in e-commerce.”

Let the competition begin
The head of the Australian Competition and Consumer Commission wants to break up the “cozy oligopoly” held by the country’s four largest banks, which control about 75% of the domestic market and have been caught in various scandals the past several years. “Market economies only work properly if you have competition and we have to make sure there is more in banking,” said Rod Sims, the commission’s CEO. “We have to fix the cozy oligopoly. They have to feel under threat.”

Separately, the Australian Securities & Investments Commission ordered Commonwealth Bank of Australia’s financial planning unit to stop charging and receiving customer fees for ongoing services, “a fresh blow for the country’s biggest bank by assets that comes ahead of a final report on widespread misconduct in the Australian banking sector. The commission said the unit “failed to meet a January 31 deadline for providing an attestation and acceptable final independent report regarding its practice of charging fees when it provided no services.”

Quotable

“There wasn’t one guy in the room, and we all realized it and started laughing.” — Angie Long, Palmer Square Capital Management chief investment officer, recalling a meeting with Citigroup in 2013 to discuss a CEO deal in which all of the participants were women.